What the Inpex decision means

01/10/2008 - 22:00

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THERE was something almost surreal about events last Friday when Western Australia lost the country's single largest resources project as the rest of the world trembled over the fallout from the global financial crisis.

What the Inpex decision means

THERE was something almost surreal about events last Friday when Western Australia lost the country's single largest resources project as the rest of the world trembled over the fallout from the global financial crisis.

It says a lot about the very healthy state of the WA economy that we could lose a massive project such as the Ichthys gas project yet still have a positive economic outlook.

Most places around the world would have pulled out all stops to secure a project that involves capital spending of $US20 billion ($A24 billion) and will employ up to 2,000 workers at the peak of its four-year construction phase

WA has experienced so many mega resources projects over the past five years - and is confidently anticipating many more over the next few years - that we may be at risk of becoming blasé about their significance; especially at a time when the global financial system has been teetering on the brink of collapse, casting serious doubts about the outlook for the world economy.

Readers should not lose sight of the scale of what is happening globally.

The US government is still negotiating a rescue package that could cost $840 billion; maybe that number is too big to comprehend.

One of the recent failures was Seattle-based bank Washington Mutual, which at one time was among the 10 largest banks in the US and had more than 2,000 branches.

Wall Street's big investment banks have been decimated, with Bear Stearns and Merrill Lynch both bought by major commercial banks and Lehman Brothers filing for bankruptcy.

The world's biggest insurance company, New York-based AIG, has effectively been nationalised by the US government to save it from collapse.

The UK market has also undergone huge upheaval. BankWest parent HBOS has been sold to banking rival Lloyds TSB, while Bradford & Bingley, one of the UK's largest housing lenders, is being taken over.

Australia, by contrast, has a very sound banking system and WA has a buoyant economic outlook, driven mainly by our exposure to China's still-strong economy.

That is why petroleum companies like Japan's Inpex and France's Total, who jointly own the Ichthys gas field off the Kimberley coast, are keen to proceed with its development.

They are not alone - companies such as Chevron, Woodside, Shell and BHP Billiton are also vigorously pursuing large projects off WA's northern coast.

This includes proposals for several large liquefied natural gas (LNG) projects in the Kimberley, an area that has never experienced major industrial development.

Against this backdrop, it is understandable that state and federal governments want to carefully evaluate these proposals, in particular to look at their likely impact on the environment, tourism and Aboriginal heritage.

That was the role of the Northern Development Taskforce, which was just weeks away from making a recommendation on a single hub for LNG plants in the Kimberley.

However, that timeline did not satisfy Inpex, which has opted for the certainty provided by the Northern Territory government.

Inpex, like all observers of the project approvals process in WA, would understand that it is one thing for a taskforce to make a recommendation and quite another for that recommendation to become a final government policy position.

Inpex also had to contend with the possibility that the taskforce may recommend a site that was not attractive from a commercial and technical perspective.

Inpex's decision to build its LNG plant in Darwin has, quite rightly, become a touchstone for frustration over the slow, complex and uncertain approvals process in WA.

It's worth remembering that Ichthys is not the only big project in the Kimberley to be frustrated by the Carpenter government's decision-making process.

Until the state election, the residents of Kununurra had just about given up any hope of seeing the long-delayed stage 2 expansion of the Ord River irrigation area.

The Gallop and Carpenter governments had seven years to facilitate an expansion of the Ord, and failed. They did clear some of the blockages, however, in particular negotiating a settlement with the local indigenous community.

But the crucial blockage was their failure to approve the commercial planting of genetically modified cotton, which extensive studies have shown to be a commercially attractive option.

The approvals process for mining and resources projects is just one dimension of a larger issue in WA.

Planning approvals for land developments and building projects also cause immense frustration, for nearly all parties involved.

This is an area where the property industry has been advocating creative solutions that address the staffing shortages and depleted experience in the local government sector.

It has often been suggested that expert industry panels should be convened, at the expense of land and property developers, to provide quick and expert guidance.

The Town of Victoria Park adopted this model when it was asked to review Mirvac's apartment project at Burswood. The council accepted that it did not have the relevant in-house experience or skills and therefore established an expert panel to provide advice.

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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